HOMETRUST BANCSHARES, INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

Forward-Looking Statements
Certain matters in this Form 10-Q constitute forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. These
statements relate to our financial condition, results of operations, plans,
objectives, future performance or business. Forward-looking statements are not
statements of historical fact, but instead are based on certain assumptions and
are generally identified by use of the words "believes," "expects,"
"anticipates," "estimates," "forecasts," "intends," "plans," "targets,"
"potentially," "probably," "projects," "outlook" or similar expressions or
future or conditional verbs such as "may," "will," "should," "would," and
"could." Forward-looking statements include statements with respect to our
beliefs, plans, objectives, goals, expectations, assumptions, and statements
about future economic performance and projections of financial items. These
forward-looking statements are subject to known and unknown risks, uncertainties
and other factors that could cause actual results to differ materially from the
results anticipated or implied by our forward-looking statements.
The factors that could result in material differentiation include, but are not
limited to:
•the effect of the COVID-19 pandemic, including on our credit quality and
business operations, as well as its impact on general economic and financial
market conditions and other uncertainties resulting from the COVID-19 pandemic,
such as the extent and duration of the impact on public health, the U.S. and
global economies, and consumer and corporate customers, including economic
activity, employment levels and market liquidity;
•the credit risks of lending activities, including changes in the level and
trend of loan delinquencies and write offs and changes in our allowance for
credit losses and provision for credit losses that may be impacted by
deterioration in the housing and commercial real estate markets;
•changes in general economic conditions, either nationally or in our market
areas;
•changes in the levels of general interest rates, and the relative differences
between short and long term interest rates, deposit interest rates, our net
interest margin and funding sources;
•uncertainty regarding the limited future of LIBOR, and the expected transition
toward new interest rate benchmarks;
•fluctuations in the demand for loans, the number of unsold homes, land and
other properties and fluctuations in real estate values in our market areas;
•decreases in the secondary market for the sale of loans that we originate;
•results of examinations of us by the Board of Governors of the Federal Reserve
System ("Federal Reserve"), the NCCOB, or other regulatory authorities,
including the possibility that any such regulatory authority may, among other
things, require us to increase our allowance for credit losses, write-down
assets, change our regulatory capital position or affect our ability to borrow
funds or maintain or increase deposits, which could adversely affect our
liquidity and earnings;
•legislative or regulatory changes that adversely affect our business including
the effect of Dodd-Frank Wall Street Reform and Consumer Protection Act, changes
in laws or regulations, changes in regulatory policies and principles or the
application or interpretation of laws and regulations by regulatory agencies and
tax authorities, including changes in deferred tax asset and liability activity,
or the interpretation of regulatory capital or other rules, including as a
result of Basel III;
•our ability to attract and retain deposits;
•management's assumptions in determining the adequacy of the allowance for
credit losses;
•our ability to control operating costs and expenses, especially costs
associated with our operation as a public company;
•the use of estimates in determining fair value of certain assets, which
estimates may prove to be incorrect and result in significant declines in
valuation;
•difficulties in reducing risks associated with the loans on our balance sheet;
•staffing fluctuations in response to product demand or the implementation of
corporate strategies that affect our workforce and potential associated charges;
•disruptions, security breaches, or other adverse events, failures or
interruptions in, or attacks on, our information technology systems or on the
third-party vendors who perform several of our critical processing functions;
•our ability to retain key members of our senior management team;
•costs and effects of litigation, including settlements and judgments;
•our ability to successfully integrate any assets, liabilities, customers,
systems, and management personnel we may in the future acquire into our
operations and our ability to realize related revenue synergies and cost savings
within expected time frames and any goodwill charges related thereto;
•increased competitive pressures among financial services companies;
•changes in consumer spending, borrowing and savings habits;
•the availability of resources to address changes in laws, rules, or regulations
or to respond to regulatory actions;
•adverse changes in the securities markets;
•inability of key third-party providers to perform their obligations to us;
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•changes in accounting principles, policies or guidelines and practices, as may
be adopted by the financial institution regulatory agencies, the Public Company
Accounting Oversight Board or the Financial Accounting Standards Board;
•other economic, competitive, governmental, regulatory, and technological
factors affecting our operations, pricing, products and services including the
CARES Act; and
•other risks detailed from time to time in our filings with the SEC, including
our 2021 Form 10-K.
Many of the forward-looking statements are based upon management's beliefs and
assumptions at the time they are made. We undertake no obligation to publicly
update or revise any forward-looking statements included in this report or to
update the reasons why actual results could differ from those contained in such
statements, whether as a result of new information, future events or
otherwise. In light of these risks, uncertainties and assumptions, the
forward-looking statements discussed in this report might not occur and you
should not put undue reliance on any forward-looking statements.
As used throughout this report, the terms "we", "our", "us", "HomeTrust
Bancshares" and the "Company" refer to HomeTrust Bancshares, Inc. and its
consolidated subsidiary, HomeTrust Bank (the "Bank"), unless the context
indicates otherwise.
Overview
HomeTrust Bancshares, Inc., a Maryland corporation, was formed for the purpose
of becoming the holding company for HomeTrust Bank in connection with the Bank's
conversion from mutual to stock form, which was completed on July 10, 2012 (the
"Conversion"). As a bank holding company and financial holding company, we are
regulated by the Federal Reserve. As a North Carolina state-chartered bank, and
member of the FRB, the Bank's primary regulators are the NCCOB and the Federal
Reserve. The Bank's deposits are federally insured up to applicable limits by
the FDIC. The Bank is a member of the FHLB of Atlanta, which is one of the 12
regional banks in the FHLB System. Our headquarters is located in Asheville,
North Carolina.
Our principal business consists of attracting deposits from the general public
and investing those funds, along with borrowed funds, in commercial real estate
loans, construction and development loans, commercial and industrial loans,
equipment finance leases, municipal leases, loans secured by first and second
mortgages on one-to-four family residences including home equity loans,
construction and land/lot loans, indirect automobile loans, and other consumer
loans. We also originate one-to-four family loans, SBA loans, and HELOCs to sell
to third parties. In addition, we invest in debt securities issued by United
States Government agencies and GSEs, corporate bonds, commercial paper and
certificates of deposit in other banks insured by the FDIC.
We offer a variety of deposit accounts for individuals, businesses, and
nonprofit organizations. Deposits and borrowings are our primary source of funds
for our lending and investing activities.
We are significantly affected by prevailing economic conditions, as well as
government policies and regulations concerning, among other things, monetary and
fiscal affairs, housing and financial institutions. Deposit flows are influenced
by a number of factors, including interest rates paid on competing time
deposits, other investments, account maturities, and the overall level of
personal income and savings. Lending activities are influenced by the demand for
funds, the number and quality of lenders, and regional economic cycles.
Our primary source of pre-tax income is net interest income. Net interest income
is the difference between interest income, which is the income that we earn on
our loans and investments, and interest expense, which is the interest that is
paid on our deposits and borrowings. Changes in levels of interest rates affect
our net interest income. Because the length of the COVID-19 pandemic and the
efficacy of the extraordinary measures put in place to address its economic
consequences are unknown, including the 150 basis point reduction in the
targeted federal funds rate during 2020, until the pandemic subsides, we expect
our net interest income and net interest margin to be adversely affected
throughout fiscal 2022 and possibly longer.
A secondary source of income is noninterest income, which includes revenue we
receive from providing products and services, including service charges and fees
on deposit accounts, loan income and fees, lease income, gain on the sale of
loans held for sale, and gains and losses from sales of debt securities.
An offset to net interest income is the provision for credit losses which is
required to establish and maintain the ACL. All financial assets measured at
amortized cost and off balance sheet credit exposures, including loans,
investment securities and unfunded commitments are evaluated for credit losses.
See "Note 1 - Summary of Significant Accounting Policies" in Item 1 of our 2021
Form 10-K for further discussion.
Our noninterest expenses consist primarily of salaries and employee benefits,
occupancy expense, and computer services. Salaries and benefits consist
primarily of the salaries and wages paid to our employees, payroll taxes,
expenses for retirement and other employee benefits. Occupancy expenses, which
are the fixed and variable costs of buildings and equipment, consist primarily
of lease payments, property taxes, depreciation charges, maintenance and costs
of utilities.
Our geographic footprint includes seven markets obtained through numerous
strategic acquisitions as well as two de novo commercial loan offices. Looking
forward, we believe opportunities currently exist within our market areas to
grow our franchise. While COVID-19 has dampened our growth activities, we
believe as the local and global economies return to normalcy the Company remains
in a position to create growth. We may also seek to expand our franchise through
the selective acquisition of individual branches, loan purchases and, to a
lesser degree, whole bank transactions that meet our investment and market
objectives. We will continue to be disciplined as it pertains to future
expansion focusing primarily on growth in our current market areas.
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At December 31, 2021, we had over 30 locations in North Carolina (including the
Asheville metropolitan area, the "Piedmont" region, Charlotte, and
Raleigh/Cary), Upstate South Carolina (Greenville), East Tennessee (including
Kingsport/Johnson City, Knoxville, and Morristown) and Southwest Virginia
(including the Roanoke Valley). During the quarter ended September 30, 2021, we
closed nine branches located in North Carolina, Tennessee, and Virginia.
Critical Accounting Policies and Estimates
Certain of our accounting policies are important to the portrayal of our
financial condition, since they require management to make difficult, complex or
subjective judgments, some of which may relate to matters that are inherently
uncertain. Estimates associated with these policies are susceptible to material
changes as a result of changes in facts and circumstances which could include,
but are not limited to, changes in interest rates, changes in the performance of
the economy and changes in the financial condition of borrowers.
The following represents our critical accounting policy:
Allowance for Credit Losses, or ACL, on Loans. The ACL reflects our estimate of
credit losses that will result from the inability of our borrowers to make
required loan payments. We charge off loans against the ACL and subsequent
recoveries, if any, increase the ACL when they are recognized. We use a
systematic methodology to determine our ACL for loans held for investment and
certain off-balance-sheet credit exposures. The ACL is a valuation account that
is deducted from the amortized cost basis to present the net amount expected to
be collected on the loan portfolio. We consider the effects of past events,
current conditions, and reasonable and supportable forecasts on the
collectability of the loan portfolio. The estimate of our ACL involves a high
degree of judgment; therefore, our process for determining expected credit
losses may result in a range of expected credit losses. Our ACL recorded in the
balance sheet reflects our best estimate within the range of expected credit
losses. We recognize in net income the amount needed to adjust the ACL for
management's current estimate of expected credit losses. Our ACL is calculated
using collectively evaluated and individually evaluated loans.
Non-GAAP Financial Measures

In addition to results presented in accordance with GAAP, this report contains
certain non-GAAP financial measures, which include: tangible book value;
tangible book value per share, tangible equity to tangible assets ratio; and the
ratio of the ACL to total loans excluding PPP loans. Management has presented
the non-GAAP financial measures in this discussion and analysis because it
believes including these items provides useful and comparative information to
assess trends in our core operations while facilitating the comparison of the
quality and composition of our earnings over time and in comparison to our
competitors. However, these non-GAAP financial measures are supplemental, are
not audited and are not a substitute for operating results or any analysis
determined in accordance with GAAP. Where applicable, we have also presented
comparable earnings information using GAAP financial measures. Because not all
companies use the same calculations, our presentation may not be comparable to
other similarly titled measures as calculated by other companies. See
"Comparison of Results of Operations" for more detailed information about our
financial performance for the three and six months ended December 31, 2021 and
2020.

Set forth below is a reconciliation to GAAP of tangible book value and tangible
book value per share:

                                                                                          As of
(Dollars in thousands, except per share data)                  December 31,           September 30,           December 31,
                                                                   2021                   2021                    2020
Total stockholders' equity                                   $     401,746          $      396,511          $     404,724
Less: goodwill, core deposit intangibles, net of taxes              25,780                  25,830                 26,130
Tangible book value                                          $     375,966          $      370,681          $     378,594
Common shares outstanding                                       16,303,461              16,307,658             16,791,027
Tangible book value per share                                $       23.06          $        22.73          $       22.55
Book value per share                                         $       24.64          $        24.31          $       24.10


Set forth below is a reconciliation to GAAP of tangible equity to tangible
assets:

                                                                        As 

of

(Dollars in thousands)                                       December 31,                     September 30,         December 31,
                                                                 2021                             2021                  2020
Tangible equity (1)                                         $   375,966                      $    370,681          $   378,594
Total assets                                                  3,502,819                         3,481,360            3,679,971
Less: goodwill, core deposit intangibles, net of
taxes                                                            25,780                            25,830               26,130
Total tangible assets                                       $ 3,477,039                      $  3,455,530          $ 3,653,841
Tangible equity to tangible assets                                10.81  %                          10.73  %             10.36  %


_________________________________________________________________

(1)  Tangible equity (or tangible book value) is equal to total stockholders'
equity less goodwill and core deposit intangibles, net of related deferred tax
liabilities.


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Set forth below is a reconciliation to GAAP of the ACL to total loans and the
ACL as adjusted to exclude PPP loans:

       (Dollars in thousands)          December 31,                  

September 30, December 31,

                                           2021                          2021               2020
       Total gross loans receivable   $ 2,696,072                   $  2,719,642       $ 2,678,624
       Less: PPP loans                     19,044                         28,762            64,845
       Adjusted loans                 $ 2,677,028                   $  2,690,880       $ 2,613,779

       ACL                            $    30,933                   $     34,406       $    39,844
       ACL / Adjusted loans                  1.16  %                        1.28  %           1.52  %



Comparison of Financial Condition at December 31, 2021 and June 30, 2021
General.  Total assets and liabilities decreased by $21.9 million and $27.1
million down to $3.5 billion and $3.1 billion, respectively, at December 31,
2021 as compared to June 30, 2021. The decrease in assets was primarily driven
by a combined decrease of $56.9 million, or 23.0%, in cash and cash equivalents,
certificates of deposit in other banks, and debt securities available for sale,
and a $37.2 million, or 1.4%, decrease in loans receivable as the Company
redirected its excess liquidity to continue paying down borrowings during the
period. These decreases were partially offset by a $64.6 million, or 34.1%,
increase in commercial paper and a $8.5 million, or 9.1%, increase in loans held
for sale.
Cash and cash equivalents and commercial paper.  Total cash and cash equivalents
decreased $16.2 million, or 31.7%, to $34.8 million at December 31, 2021 from
$51.0 million at June 30, 2021. Commercial paper increased $64.6 million, or
34.1%, to $254.2 million at December 31, 2021 from $189.6 million at June 30,
2021 which was funded by excess interest-earning deposits and a decrease in debt
securities available for sale.
Debt securities available for sale and other investments.  Debt securities
available for sale decreased $34.6 million, or 22.1%, to $121.9 million at
December 31, 2021 from $156.5 million at June 30, 2021. At December 31, 2021,
certificates of deposit in other banks decreased $6.1 million, or 15.3%, to
$34.0 million compared to $40.1 million at June 30, 2021. The decrease in
certificates of deposit in other banks was due to $7.1 million in maturities
partially offset by $1.0 million in purchases. All certificates of deposit in
other banks are fully insured by the FDIC. Other investments at cost decreased
$1.6 million, or 6.7%, to $22.1 million at December 31, 2021 from $23.7 million
at June 30, 2021. Other investments at cost included SBIC investments, FRB
stock, and FHLB stock totaling $11.7 million, $7.4 million, and $3.0 million,
respectively. The overall decrease was driven by a $3.2 million, or 51.8%,
reduction in FHLB stock as a result of the paydowns in borrowings during the
current period.
Loans held for sale. Loans held for sale increased $8.6 million, or 9.1%, to
$102.1 million at December 31, 2021 from $93.5 million at June 30, 2021. The
increase was primarily driven by a $17.1 million, or 29.7%, increase in HELOCs
originated for sale, a $12.6 million, or 39.6%, decrease in mortgage loans held
for sale, and a $4.1 million, or 97.6%, increase in SBA loans held for sale.
Loans, net of deferred loan fees and costs.  Total loans decreased $37.2
million, or 1.4%, to $2.7 billion at December 31, 2021 from the balance at June
30, 2021. The decrease was driven by a $88.5 million, or 11.6%, decrease in
retail consumer loans resulting from a reduction in one-to-four family loans and
indirect auto finance loans, partially as a result of the sale of $11.5 million
of these loans in November 2021. This decrease was partially offset by a $78.9
million, or 4.1%, increase in commercial loans (excluding PPP loans) as the
Company continues its focus on the growth of this loan segment.
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Commercial and retail consumer loans consist of the following at the dates
indicated:
                                                    As of                                                                       Percent of total
(Dollars in thousands)                December 31,            June 30,                      Change                     December 31,             June 30,
                                          2021                  2021                 $                  %                  2021                   2021
Commercial loans:
Commercial real estate               $  1,113,330          $ 1,142,276          $ (28,946)             (2.5) %                 41.3  %               41.8  %
Construction and development              226,439              179,427             47,012              26.2                     8.4                  

6.6

Commercial and industrial                 162,396              141,341             21,055              14.9                     6.0                   5.2
Equipment finance                         367,008              317,920             49,088              15.4                    13.6                  11.6
Municipal leases                          131,078              140,421             (9,343)             (6.7)                    4.9                   5.1
PPP loans                                  19,044               46,650            (27,606)            (59.2)                    0.7                   1.7
Total commercial loans                  2,019,295            1,968,035             51,260               2.6                    74.9                  72.0

Retail consumer loans:
One-to-four family                        356,850              406,549            (49,699)            (12.2)                   13.2                  14.9
HELOCs - originated                       128,189              130,225             (2,036)             (1.6)                    4.8                   4.8
HELOCs - purchased                         30,795               38,976             (8,181)            (21.0)                    1.1                   1.4
Construction and land/lots                 69,253               66,027              3,226               4.9                     2.6                   2.4
Indirect auto finance                      84,581              115,093            (30,512)            (26.5)                    3.1                   4.2
Consumer                                    7,109                8,362             (1,253)            (15.0)                    0.3                   0.3
Total retail consumer loans               676,777              765,232            (88,455)            (11.6)                   25.1                  28.0
Total loans                          $  2,696,072          $ 2,733,267          $ (37,195)             (1.4) %                100.0  %              100.0  %


Asset quality. Nonperforming assets decreased by $6.6 million, or 51.4%, to $6.2
million, or 0.18%, of total assets at December 31, 2021 compared to $12.8
million, or 0.36% of total assets at June 30, 2021. The significant decrease
from June 30, 2021 was primarily a result of the payoff of two commercial real
estate loan relationships totaling $5.1 million in the prior quarter.
Nonperforming assets included $6.2 million in nonaccruing loans and $45,000 in
REO at December 31, 2021, compared to $12.6 million and $188,000 in nonaccruing
loans and REO, respectively, at June 30, 2021. Nonperforming loans to total
loans was 0.23% at December 31, 2021 and 0.46% at June 30, 2021.
As of December 31, 2021, we had $652,000 in loans with full principal and
interest payment deferrals related to COVID-19 compared to $107,000 at June 30,
2021. Substantially all loans placed on full payment deferral during the
pandemic have come out of deferral and borrowers are either making regular loan
payments or interest-only payments. As of December 31, 2021, we had $15.6
million in commercial loan deferrals on interest-only payments compared to $78.9
million at June 30, 2021.
We believe the steps we have taken and continue to take are necessary to
effectively manage our portfolio and assist our customers through the ongoing
uncertainty surrounding the duration, impact and government response to the
COVID-19 pandemic. In addition, we will continue to work with our customers to
determine the best option for repayment of accrued interest on the deferred
payments.
The ratio of classified assets to total assets decreased to 0.65% at December
31, 2021 from 0.76% at June 30, 2021. Classified assets decreased $3.8 million,
or 14.2%, to $22.9 million at December 31, 2021 compared to $26.7 million at
June 30, 2021 primarily due to the payoff of two commercial real estate loan
relationships discussed above. The Company's overall asset quality metrics
continue to demonstrate its commitment to growing and maintaining a loan
portfolio with a moderate risk profile; however, the Company will remain
diligent in its monitoring of the portfolio during these uncertain times.
Our individually evaluated loans include loans on nonaccrual status and all
TDRs, whether performing or on nonaccrual status under their restructured
terms. Individually evaluated loans may be evaluated for reserve purposes using
either the discounted cash flow or the collateral valuation method. As of
December 31, 2021, there were $5.3 million in loans individually evaluated. For
more information on these individually evaluated loans, see "Note 6 - Loans and
Allowance for Credit Losses on Loans" in this Quarterly Report on Form 10-Q.
Allowance for credit losses.  The ACL on loans was $30.9 million, or 1.15%, of
total loans at December 31, 2021 compared to $35.5 million, or 1.30%, of total
loans at June 30, 2021. The overall decrease was driven by lower expected credit
losses estimated by management based on an improving economic outlook.
There was a net benefit for credit losses of $4.0 million for the six months
ended December 31, 2021, compared to a $2.1 million net benefit for the
corresponding period in fiscal year 2021. Net loan charge-offs totaled $760,000
for the six months ended December 31, 2021, compared to net charge-offs of
$637,000 for the same period last year. Net charge-offs as a percentage of
average loans were 0.05% for the six months ended December 31, 2021 compared to
net charge-offs of 0.04% for the corresponding period last year.
The allowance as a percentage of nonaccruing loans increased to 500.70% at
December 31, 2021 from 281.38% at June 30, 2021.
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Deferred income taxes. Deferred income taxes decreased $4.9 million, or 28.9%,
to $12.0 million at December 31, 2021 from $16.9 million at June 30, 2021. The
decrease was primarily a result of a release and reduction of the ACL,
depreciation on new equipment finance leases, and bonus tax depreciation on new
premises.
Other assets. Other assets increased $1.4 million, or 2.5%, to $58.9 million at
December 31, 2021 from $57.5 million at June 30, 2021. The increase was
primarily driven by a reclassification of assets held for sale from premises and
equipment related to the nine branch closures, partially offset by lower net
operating lease assets and lower current taxes receivable.
Deposits.  Deposits increased $43.2 million, or 1.5%, during the six months
ended December 31, 2021 to $3.0 billion, driven by our successful efforts to
increase core deposits which increased $74.1 million, or 3.0%. Partially
offsetting this deposit increase was a decrease of $31.0 million, or 6.5%, in
certificates of deposit as part of our managed runoff of the portfolio.
The following table sets forth our deposits by type of deposit account as of the
dates indicated:
                                                           As of                                                                        Percent of total
(Dollars in thousands)                       December 31,            June
30,                      Change                     December 31,              June 30,
                                                 2021                  2021                 $                 %                   2021                    2021
Core deposits:
   Noninterest-bearing accounts             $    677,159          $   636,414          $ 40,745                6.4  %                 22.6  %                 21.5  %
   NOW accounts                                  644,343              644,958              (615)              (0.1)                   21.5                    21.8
   Money market accounts                       1,010,901              975,001            35,900                3.7                    33.7                    33.0
   Savings accounts                              224,474              226,391            (1,917)              (0.8)                    7.5                     7.7
Core deposits                                  2,556,877            2,482,764            74,113                3.0                    85.3                    84.0
Certificates of deposit                          441,814              472,777           (30,963)              (6.5)                   14.7                    16.0
Total                                       $  2,998,691          $ 2,955,541          $ 43,150                1.5  %                100.0  %                100.0  %


Borrowings.  Borrowings decreased $67.0 million, or 58.3%, to $48.0 million at
December 31, 2021 compared to $115.0 million at June 30, 2021 as excess
liquidity was used to pay down borrowings.
Other liabilities.  Other liabilities decreased $3.3 million, or 5.7%, to $54.4
million at December 31, 2021 compared to $57.7 million at June 30, 2021. The
decrease was primarily a result of a $1.7 million, or 48.3%, reduction in
accrued profit sharing expenses and a $902,000, or 99.1% decrease in commercial
loan suspense.
Average Balances, Interest and Average Yield/Cost
Our operating results depend primarily on our net interest income, which is the
difference between interest income on interest-earning assets, including loans
and securities, and interest expense incurred on interest-bearing liabilities,
including deposits and other borrowed funds. Interest rate fluctuations, as well
as changes in the amount and type of interest-earning assets and
interest-bearing liabilities, combine to affect net interest income. Our net
interest income is affected by changes in the amount and mix of interest-earning
assets and interest-bearing liabilities, referred to as a "volume change". It is
also affected by changes in yields earned on interest-earning assets and rates
paid on interest-bearing liabilities, referred to as a "rate change".
The following table presents the distribution of average assets, liabilities and
equity, as well as interest income on average interest-earning assets and
interest expense paid on average interest-bearing liabilities. All average
balances are daily average balances. Nonaccruing loans have been included in the
table as loans carrying a zero yield.




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The following table presents the distribution of average assets, liabilities and
equity, as well as interest income and fees on average interest-earning assets
and interest expense and interest-bearing liabilities:
                                                                         

For the Three Months Ended December 31,

                                                             2021                                                        2020
(Dollars in thousands)                 Average            Interest                                  Average            Interest
                                       Balance             Earned/             Yield/               Balance             Earned/             Yield/
                                     Outstanding            Paid                Rate              Outstanding            Paid                Rate

Assets:

Interest-earning assets:
Loans receivable(1)(2)              $ 2,819,262          $ 27,236                  3.83  %       $ 2,826,133          $ 28,648                 4.02  %
Commercial paper and deposits in
other banks                             313,882               468                  0.59              417,401               614                 0.58
Debt securities available for sale      121,987               411                  1.34              133,856               504                 1.50
Other interest-earning assets(3)         22,327               680                 12.09               39,290               696                 7.03
Total interest-earning assets         3,277,458            28,795                  3.49            3,416,680            30,462                 3.54
Other assets                            259,591                                                      257,572
Total assets                        $ 3,537,049                                                  $ 3,674,252
Liabilities and equity:
Interest-bearing deposits:
Interest-bearing checking accounts  $   635,268          $    331                  0.21  %       $   584,530          $    353                 0.24  %
Money market accounts                   998,297               349                  0.14              848,760               414                 0.19
Savings accounts                        222,464                40                  0.07              206,205                38                 0.07
Certificate accounts                    443,546               585                  0.52              576,078             1,542                 1.06
Total interest-bearing deposits       2,299,575             1,305                  0.23            2,215,573             2,347                 0.42
Borrowings                               57,248                15                  0.11              475,000             1,688                 1.41
 Total interest-bearing liabilities   2,356,823             1,320                  0.22            2,690,573             4,035                 0.59
Noninterest-bearing deposits            736,271                                                      523,488
Other liabilities                        44,974                                                       57,813
Total liabilities                     3,138,068                                                    3,271,874
Stockholders' equity                    398,981                                                      402,378
Total liabilities and stockholders'
equity                              $ 3,537,049                                                  $ 3,674,252

Net earning assets                  $   920,635                                                  $   726,107
Average interest-earning assets to
average interest-bearing
liabilities                              139.06  %                                                    126.99  %
Tax-equivalent:
Net interest income                                      $ 27,475                                                     $ 26,427
Interest rate spread                                                               3.27  %                                                     2.95  %
Net interest margin(4)                                                             3.33  %                                                     3.07  %
Non-tax-equivalent:
Net interest income                                      $ 27,168                                                     $ 26,122
Interest rate spread                                                               3.23  %                                                     2.91  %
Net interest margin(4)                                                             3.29  %                                                     3.03  %

_________________________________________________________________

(1)The average loans receivable balances include loans held for sale and
nonaccruing loans.
(2)Interest income used in the average interest earned and yield calculation
includes the tax equivalent adjustment of $307 and $305 for the three months
ended December 31, 2021 and 2020, respectively, calculated based on a combined
federal and state tax rate of 24%.
(3)The average other interest-earning assets consist of FRB stock, FHLB stock,
and SBIC investments.
(4)Net interest income divided by average interest-earning assets.
                                       39
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For the Six Months Ended December 31,

                                                             2021                                                        2020
(Dollars in thousands)                 Average            Interest                                  Average            Interest
                                       Balance             Earned/             Yield/               Balance             Earned/             Yield/
                                     Outstanding            Paid                Rate              Outstanding            Paid                Rate

Assets:

Interest-earning assets:
Loans receivable(1)(2)              $ 2,819,482          $ 55,441                  3.90  %       $ 2,850,783          $ 57,550                 4.00  %
Commercial paper and deposits in
other banks                             295,746               799                  0.54              420,785             1,495                 0.70
Debt securities available for sale      130,143               935                  1.43              120,062             1,032                 1.71
Other interest-earning assets(3)         22,020             1,235                 11.13               39,118             1,144                 5.80
Total interest-earning assets         3,267,391            58,410                  3.55            3,430,748            61,221                 3.54
Other assets                            260,288                                                      254,610
Total assets                        $ 3,527,679                                                  $ 3,685,358
Liabilities and equity:
Interest-bearing liabilities:
Interest-bearing checking accounts  $   635,362               728                  0.23  %       $   572,505               750                 0.26  %
Money market accounts                   993,643               716                  0.14              837,153               964                 0.23
Savings accounts                        223,061                81                  0.07              203,374                75                 0.07
Certificate accounts                    450,706             1,352                  0.60              632,894             3,811                 1.19
Total interest-bearing deposits       2,302,772             2,877                  0.25            2,245,926             5,600                 0.49
Borrowings                               56,356                41                  0.15              475,000             3,375                 1.41
Total interest-bearing liabilities    2,359,128             2,918                  0.25            2,720,926             8,975                 0.65
Noninterest-bearing deposits            722,432                                                      507,087
Other liabilities                        48,393                                                       55,699
Total liabilities                     3,129,953                                                    3,283,712
Stockholders' equity                    397,726                                                      401,646
Total liabilities and stockholders'
equity                              $ 3,527,679                                                  $ 3,685,358

Net earning assets                  $   908,263                                                  $   709,822
Average interest-earning assets to
average interest-bearing
liabilities                              138.50  %                                                    126.09  %
Tax-equivalent:
Net interest income                                      $ 55,492                                                     $ 52,246
Interest rate spread                                                               3.30  %                                                     2.89  %
Net interest margin(4)                                                             3.37  %                                                     3.02  %
Non-tax-equivalent:
Net interest income                                      $ 54,875                                                     $ 51,631
Interest rate spread                                                               3.26  %                                                     2.85  %
Net interest margin(4)                                                             3.33  %                                                     2.99  %

_________________________________________________________________

(1)The average loans receivable balances include loans held for sale and
nonaccruing loans.
(2)Interest income used in the average interest earned and yield calculation
includes the tax equivalent adjustment of $617 and $615 for the six months ended
December 31, 2021 and 2020, respectively, calculated based on a combined federal
and state tax rate of 24%.
(3)The average other interest-earning assets consist of FRB stock, FHLB stock,
and SBIC investments.
(4)Net interest income divided by average interest-earning assets.
                                       40
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Rate/Volume Analysis
The following table shows the effects that changes in average balances (volume)
and average interest rates (rate) had on the interest earned on our
interest-earning assets and interest-bearing liabilities:
                                                                       

Three Months Ended December 31, 2021

Compared to

Three Months Ended December 31, 2020

                                                                      Increase/
                                                                     (Decrease)
(Dollars in thousands)                                                 due to                              Total
                                                              Volume               Rate             Increase/(Decrease)
Interest-earning assets:
Loans receivable(1)                                       $        (70)         $ (1,342)         $             (1,412)
Commercial paper and deposits in other banks                      (152)                6                          (146)
Debt securities available for sale                                 (45)              (48)                          (93)
Other interest-earning assets                                     (300)              284                           (16)
  Total interest-earning assets                                   (567)           (1,100)                       (1,667)
Interest-bearing liabilities:
Interest-bearing checking accounts                                  31               (53)                          (22)
Money market accounts                                               73              (138)                          (65)
Savings accounts                                                     3                (1)                            2
Certificate accounts                                              (355)             (602)                         (957)
 Total interest-bearing deposits                                  (248)             (794)                       (1,042)
Borrowings                                                      (1,484)             (189)                       (1,673)
  Total interest-bearing liabilities                            (1,732)             (983)                       (2,715)

Net increase (decrease) in tax equivalent interest income $ 1,165

    $   (117)         $              1,048



                                                                        Six

Months Ended December 31, 2021

Compared to

                                                                        Six 

Months Ended December 31, 2020

                                                                     Increase/
                                                                     (Decrease)
(Dollars in thousands)                                                 due to                             Total
                                                              Volume              Rate             Increase/(Decrease)
Interest-earning assets:
Loans receivable(1)                                       $      (632)         $ (1,477)         $             (2,109)
Commercial paper and deposits in other banks                     (444)             (252)                         (696)
Debt securities available for sale                                 87              (184)                          (97)
Other interest-earning assets                                    (500)              591                            91
  Total interest-earning assets                                (1,489)           (1,322)                       (2,811)
Interest-bearing liabilities:
Interest-bearing checking accounts                                 82              (104)                          (22)
Money market accounts                                             180              (428)                         (248)
Savings accounts                                                    7                (1)                            6
Certificate accounts                                           (1,097)           (1,362)                       (2,459)
 Total interest-bearing deposits                                 (828)           (1,895)                       (2,723)
Borrowings                                                     (2,974)             (360)                       (3,334)
  Total interest-bearing liabilities                           (3,802)           (2,255)                       (6,057)

Net increase (decrease) in tax equivalent interest income $ 2,313

    $    933          $              3,246


_________________________________________________________________

(1) Interest income used in the average interest earned and yield calculation
includes the tax equivalent adjustment of $307 and $305 for the three months
ended December 31, 2021 and 2020, respectively, calculated based on a combined
federal and state income tax rate of 24%. Interest income used in the average
interest earned and yield calculation includes the tax equivalent adjustment of
$617 and $615 for the six months ended December 31, 2021 and 2020, respectively,
calculated based on a combined federal and state income tax rate of 24%.
                                       41
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Comparison of Results of Operations for the Three Months Ended December 31, 2021
and 2020
General.  During the three months ended December 31, 2021, net income increased
$1.6 million, or 17.1% to $11.1 million compared to $9.5 million for the three
months ended December 31, 2020, while our diluted earnings per share increased
to $0.68 compared to $0.57 for the same period in fiscal 2021. Second quarter of
fiscal 2022 earnings were positively impacted by a $2.5 million net benefit for
credit losses, a $1.0 million increase in net interest income driven by lower
borrowing costs, and a $0.8 million increase in noninterest income.
Net Interest Income. Net interest income increased $1.1 million, or 4.0%, to
$27.2 million for the quarter ended December 31, 2021, compared to $26.1 million
for the comparative quarter in fiscal 2021. Interest and dividend income
decreased by $1.7 million, or 5.5%, primarily driven by lower average balances
on interest-bearing assets combined with lower loan yields. This decrease was
partially offset by a $2.7 million, or 67.3%, decrease in interest expense.
Average interest-earning assets decreased $139.2 million, or 4.1%, to $3.3
billion for the quarter ended December 31, 2021. The main drivers of the change
were decreases of $103.5 million, or 24.8%, in the average balance of commercial
paper and deposits in other banks and $11.9 million, or 8.9%, in debt securities
available for sale as the Company continues to use excess liquidity to reduce
borrowings, which declined by $417.8 million, or 88.0%, when compared to the
prior period. Net interest margin (on a fully taxable-equivalent basis) for the
three months ended December 31, 2021 increased to 3.33% from 3.07% for the same
period a year ago as all higher rate long-term borrowings were repaid during the
quarter ended June 30, 2021.
Total interest and dividend income decreased $1.7 million, or 5.5%, for the
quarter ended December 31, 2021 as compared to the same quarter last year, which
was primarily a result of a $1.4 million, or 5.0%, decrease in loan interest
income, and a $146,000, or 23.8%, decrease in interest income from commercial
paper and deposits in other banks. The lower interest income in each category
was mainly driven by the overall decrease in average balances as discussed
above, in addition to declines in the average yields on loans of 19 basis
points, from 4.02% to 3.83%, and debt securities available for sale of 16 basis
points, from 1.50% to 1.34%. Loan interest income for the quarter included the
amortization of $286,000 of PPP loan origination fees, a decline of $202,000
when compared to the $488,000 recognized in the prior year period. The overall
average yield on interest-earning assets decreased 5 basis points to 3.49% for
the current quarter compared to 3.54% in the same quarter last year primarily
due to the change in mix of interest-earning assets, as excess liquidity was
used to repay long-term borrowings and reduce short-term interest-earning assets
with lower yields.
Total interest expense decreased $2.7 million, or 67.3%, for the quarter ended
December 31, 2021 compared to the same period last year. The decrease was driven
by a $1.7 million, or 99.1%, decrease in interest expense on borrowings as
discussed above and a $1.0 million, or 44.4%, decrease in interest expense on
deposits. The average balance of total deposits increased by $296.8 million, or
10.8%, with noninterest-bearing deposits and interest-bearing deposits
increasing $212.8 million and $84.0 million, respectively. The increase in
interest-bearing deposits was driven by a $149.5 million, or 17.6% increase in
money market accounts, partially offset by a $132.5 million, or 23.0%, decrease
in certificates of deposit. As stated above, average borrowings for the quarter
ended December 31, 2021 decreased $417.8 million, or 88.0%, along with a 130
basis point decrease in the average cost of borrowings compared to the same
period last year. The increase in average deposits (interest and
noninterest-bearing) was due to successful deposit gathering campaigns and the
effect of government stimulus. The decrease in the average cost of borrowings
was primarily driven by the early retirement of long-term borrowings reducing
the average balance and partially driven by a shift to short-term borrowings at
lower rates. The overall average cost of funds decreased 37 basis points to
0.22% for the current quarter compared to 0.59% in the same quarter last year.
Provision (Benefit) for Credit Losses. During the three months ended December
31, 2021, there was a $2.5 million net benefit for credit losses compared to a
$3.0 million net benefit for the corresponding quarter of fiscal 2021. Net loan
charge-offs totaled $1.0 million for the three months ended December 31, 2021,
compared to net recoveries of $62,000 for the same period last year. Annualized
net charge-offs as a percentage of average loans were 0.15% for the quarter
ended December 31, 2021 compared to recoveries of 0.01% for the corresponding
quarter last year. See "Comparison of Financial Condition - Asset Quality" for
additional details.
Noninterest Income. Noninterest income increased $836,000, or 8.9%, to $10.2
million for the quarter ended December 31, 2021 from $9.3 million for the same
period in the previous year. This change was primarily due to a $369,000, or
27.3%, increase in operating lease income, a $236,000, or 41.5%, increase in
loan income and fees, and a $197,000, or 5.3%, increase in gain on sale of
loans. The increase in operating lease income was driven by increases in loan
originations and higher outstanding lease balances during the period. The
increase in loan income and fees was largely a result of transitioning SBA loan
servicing processes in-house, which began July 1, 2021. During the quarter ended
December 31, 2021, $86.9 million of residential mortgage loans originated for
sale were sold with gains of $2.2 million compared to $108.9 million sold and
gains of $2.8 million in the corresponding period in the prior year. There were
$12.6 million of sales of the guaranteed portion of SBA commercial loans with
gains of $1.3 million in the current quarter compared to $9.3 million sold and
gains of $778,000 for the same period last year. The Company sold $24.8 million
of home equity lines of credit (HELOC) during the quarter for a gain of $159,000
compared to $23.2 million sold and gains of $158,000 in the corresponding period
last year. Lastly, $11.5 million of indirect auto finance loans were sold in the
current quarter out of the held for investment portfolio for a gain of $205,000.
No such sales occurred in the same period in the prior year.
Noninterest Expense.  Noninterest expense decreased $534,000, or 2.0%, for the
quarter ended December 31, 2021 as compared to the same period last year, which
was primarily a result of a decrease of $828,000, or 5.3%, in salaries and
benefits expense due to branch closures and lower mortgage banking incentive pay
in the period, partially offset by an increase of $505,000, or 154.4%, in
marketing and advertising expense driven by reduced media advertising in the
prior period as a result of the pandemic.
                                       42
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Income Taxes. Our income tax expense for the three months ended December 31,
2021 increased $269,000, or 10.4%, to $2.9 million from $2.6 million for the
three months ended December 31, 2020 as a result of higher taxable income. The
effective tax rates for the quarters ended December 31, 2021 and 2020 were 20.5%
and 21.5%, respectively.
Comparison of Results of Operations for the Six Months Ended December 31, 2021
and 2020
General.  During the six months ended December 31, 2021, net income increased by
$6.4 million, or 42.0%, to $21.6 million from $15.2 million for the six months
ended December 31, 2020, while our diluted earnings per share increased to $1.33
for the six months ended December 31, 2021 compared to $0.92 in the same period
in fiscal 2021. Year-to-date earnings were positively impacted by a $4.0 million
net benefit in the provision for credit losses and a $6.1 million, or 67.5%,
decrease in interest expense.
Net Interest Income. Net interest income increased by $3.2 million, or 6.3%, to
$54.9 million for the six months ended December 31, 2021, compared to the same
period last year. Interest and dividend income decreased by $2.8 million, or
4.6%, primarily driven by lower average balances on interest-bearing assets
combined with lower loan yields.
Average interest-earning assets decreased $163.4 million, or 4.8%, to $3.3
billion for the six months ended December 31, 2021. The biggest reason for the
change was a decrease of $125.0 million, or 29.7%, in commercial paper and
deposits in other banks, as the Company used excess liquidity to reduce
borrowings, where the average balance declined from $475.0 million to $56.4
million. Net interest margin (on a fully taxable-equivalent basis) for the six
months ended December 31, 2021 increased to 3.37% from 3.02% for the same period
a year ago as all higher rate long-term borrowings were repaid during the
quarter ended June 30, 2021.
Total interest and dividend income decreased $2.8 million, or 4.6%, for the six
months ended December 31, 2021 as compared to the same period last year, which
was primarily a result of a $2.1 million, or 3.7%, decrease in loan interest
income and a $696,000, or 46.6%, decrease in interest income from commercial
paper and deposits in other banks. The lower interest income in each category
was mainly driven by the decrease in average balances as discussed above. In
addition, average loan yields decreased 10 basis points to 3.90% for the quarter
ended December 31, 2021 from 4.00% in the corresponding quarter last year,
average yields on debt securities available for sale decreased 28 basis points
to 1.43% from 1.71%, and average yields on commercial paper and deposits in
other banks decreased 16 basis points to 0.54% from 0.70%. Loan interest income
for the six months included the amortization of $710,000 of PPP loan origination
fees, a decline of $32,000 when compared to the $742,000 recognized in the prior
year period. Despite the decrease in yield on loans and other assets discussed
above, the overall average yield on interest-earning assets increased one basis
point to 3.55% for the six months compared to 3.54% in the same period last year
primarily due to the use of low yielding excess liquidity to repay long-term
borrowings.
Total interest expense decreased $6.1 million, or 67.5%, for the six months
ended December 31, 2021 compared to the same period last year. The decrease was
driven by a $3.3 million, or 98.8%, decrease in interest expense on borrowings
as discussed above and a $2.7 million, or 48.6%, decrease in interest expense on
deposits. The average balance of total deposits increased by $272.2 million, or
9.9%, with noninterest-bearing deposits and interest-bearing deposits increasing
$215.4 million and $56.8 million, respectively. The increase in interest-bearing
deposits was driven by a $62.9 million, or 11.0%, increase in interest-bearing
checking accounts and a $156.5 million, or 18.7%, increase in money market
accounts, partially offset by a $182.2 million, or 28.8%, decrease in
certificates of deposit. The increase in average deposits (interest and
noninterest-bearing) was due to successful deposit gathering campaigns and the
effect of government stimulus. As stated above, average borrowings for the six
months ended December 31, 2021 decreased $418.6 million, or 88.1%, along with a
126 basis point decrease in the average cost of borrowings compared to the same
period last year. The decrease in the average cost of borrowings was primarily
driven by the early retirement of long-term borrowings reducing the average
balance and partially driven by a shift to short-term borrowings at lower rates.
The overall average cost of funds decreased 40 basis points to 0.25% for the six
months compared to 0.65% in the same period last year.
Provision (Benefit) for Loan Losses.  During the six months ended December 31,
2021 there was a $4.0 million net benefit for credit losses compared to a $2.1
million net benefit for credit losses for the corresponding period of fiscal
2021. Net loan charge-offs totaled $760,000 for the six months ended
December 31, 2021, compared to net loan charge-offs of $637,000 for the same
period last year. Annualized net charge-offs as a percentage of average loans
were 0.05% for the six months ended December 31, 2021 compared to 0.04% for the
prior year period. See "Comparison of Financial Condition - Asset Quality" for
additional details.
Noninterest Income.  Noninterest income increased $2.5 million, or 14.2%, to
$20.5 million for the six months ended December 31, 2021 from $18.0 million for
the same period in the previous year. This change was due to a $910,000, or
12.9%, increase in the gain on sale of loans, a $741,000, or 71.0%, increase in
loan income and fees, a $583,000, or 21.8%, increase in operating lease income,
and a $372,000, or 8.2%, increase in service charges and fees on deposit
accounts. During the six months ended December 31, 2021, $150.7 million of
residential mortgage loans originated for sale were sold with gains of $4.3
million compared to $190.7 million sold and gains of $5.0 million in the
corresponding period in the prior year. There were $27.0 million of sales of the
guaranteed portion of SBA commercial loans with gains of $3.1 million in the six
months compared to $24.5 million sold and gains of $1.8 million for the same
period last year. The Company sold $72.2 million of HELOCs during the six months
ended December 31, 2021 for a gain of $426,000 compared to $42.1 million sold
and gains of $258,000 in the corresponding period last year. Lastly, $11.5
million of indirect auto finance loans were sold out of the held for investment
portfolio during the current period for a gain of $205,000. No such sales
occurred in the same period in the prior year. The $741,000, or 71.0%, increase
in loan income and fees was primarily a result of $536,000 in additional loan
servicing fees as a result of bringing the Company's SBA loan servicing process
in-house, which began July 1, 2021, and $279,000 in additional prepayment fee
income from our equipment finance line of business. The increase in operating
lease income was primarily driven by increases in loan originations and higher
outstanding lease balances during the period. Lastly, the increase in service
charges on deposit accounts was the result of a $290,000 increase in interchange
income driven by higher debit card usage.
                                       43
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Noninterest Expense.  Noninterest expense decreased $518,000, or 1.0%, for the
six months ended December 31, 2021 as compared to the same period last year,
which was primarily a result of a decrease of $755,000, or 2.4%, in salaries and
benefits expense due to branch closures and lower incentive pay in the period
and a reduction of core deposit amortization expense of $282,000, or 64.1%,
partially offset by an increase of $885,000, or 135.7%, in marketing and
advertising expense driven by reduced media advertising in the prior year period
as a result of the pandemic.
Income Taxes.  For the six months ended December 31, 2021, the Company's income
tax expense increased $1.8 million, or 44.6%, to $5.8 million from $4.0 million
as a result of higher taxable income. The effective tax rates for the six months
ended December 31, 2021 and 2020 were 21.3% and 21.0%, respectively.
Liquidity
Management maintains a liquidity position that it believes will adequately
provide funding for loan demand and deposit run-off that may occur in the normal
course of business. We rely on a number of different sources in order to meet
our potential liquidity demands. The primary sources are increases in deposit
accounts, cash flows from loan payments, commercial paper, and the securities
portfolio.
In addition to these primary sources of funds, management has several secondary
sources available to meet potential funding requirements. As of December 31,
2021, the Bank had an available borrowing capacity of $285.1 million with the
FHLB of Atlanta, a $59.4 million line of credit with the FRB and a line of
credit with three unaffiliated banks totaling $100.0 million. At December 31,
2021, we had $30.0 million in FHLB advances outstanding, $18.0 million in FRB
borrowings outstanding, and nothing outstanding under our other lines of credit.
Additionally, we classify our securities portfolio as available for sale,
providing an additional source of liquidity. Management believes that our
securities portfolio is of high quality and the securities would therefore be
marketable. We have historically sold longer term fixed-rate mortgage loans in
the secondary market to reduce interest rate risk and to create still another
source of liquidity. From time to time we also utilize brokered time deposits to
supplement our other sources of funds. Brokered time deposits are obtained by
utilizing an outside broker that is paid a fee. This funding requires advance
notification to structure the type of deposit desired by us. Brokered deposits
can vary in term from one month to several years and have the benefit of being a
source of longer-term funding. We also may utilize brokered deposits to help
manage interest rate risk by extending the term to repricing of our liabilities,
enhance our liquidity and fund asset growth. Brokered deposits are typically
from outside our primary market areas, and our brokered deposit levels may vary
from time to time depending on competitive interest rate conditions and other
factors. At December 31, 2021 brokered deposits totaled $2.3 million, or 0.1%,
of total deposits, compared to $4.3 million, or 0.2%, of total deposits, at June
30, 2021.
Liquidity management is both a daily and long-term function of business
management. Excess liquidity is generally invested in short-term investments,
such as overnight deposits, federal funds, and commercial paper. On a longer
term basis, we maintain a strategy of investing in various lending products and
investment securities, including MBS. HomeTrust Bancshares on a stand-alone
level is a separate legal entity from the Bank and we must provide for our own
liquidity and pay our own operating expenses. We have the ability to receive
dividends or capital distributions from the Bank, although there are regulatory
restrictions on the ability of the Bank to pay dividends. At December 31, 2021,
HomeTrust Bancshares on a stand-alone basis had liquid assets of $4.4 million.
We use our sources of funds primarily to meet our ongoing commitments, pay
maturing deposits and fund withdrawals, and to fund loan commitments. At
December 31, 2021, the total approved loan commitments and unused lines of
credit outstanding amounted to $279.9 million and $539.8 million, respectively,
as compared to $401.1 million and $530.5 million, respectively, as of June 30,
2021. Certificates of deposit scheduled to mature in one year or less at
December 31, 2021, totaled $381.3 million. It is management's policy to manage
deposit rates that are competitive with other local financial institutions.
Based on this management strategy, we believe a majority of our maturing
deposits will continue to remain with us.
During the first six months of fiscal 2022, cash and cash equivalents decreased
$16.2 million, or 31.7%, to $34.8 million as of December 31, 2021 from $51.0
million as of June 30, 2021 as excess liquidity was used to pay down borrowings.
Off-Balance Sheet Activities
In the normal course of operations, we engage in a variety of financial
transactions that are not recorded in our financial statements. These
transactions involve varying degrees of off-balance sheet credit, interest rate
and liquidity risks. These transactions are used primarily to manage customers'
requests for funding and take the form of loan commitments and lines of
credit. For the six months ended December 31, 2021, we did not engage in any
off-balance sheet transactions likely to have a material effect on our financial
condition, results of operations or cash flows.
                                       44
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A summary of our off-balance sheet commitments to extend credit at December 31,
2021, is as follows:
(Dollars in thousands)

Undisbursed portion of construction loans    $ 201,032
Commitments to make loans                       78,875
Unused lines of credit                         539,778
Standby letters of credit                        9,496
Total loan commitments                       $ 829,181


Capital Resources
At December 31, 2021, stockholders' equity totaled $401.7 million. HomeTrust
Bancshares, Inc. is a bank holding company and a financial holding company
subject to regulation by the Federal Reserve. As a bank holding company, we are
subject to capital adequacy requirements of the Federal Reserve under the Bank
Holding Company Act of 1956, as amended and the regulations of the Federal
Reserve. Our subsidiary, the Bank, an FDIC-insured, North Carolina
state-chartered bank and a member of the Federal Reserve, is supervised and
regulated by the Federal Reserve and the NCCOB and is subject to minimum capital
requirements applicable to state member banks established by the Federal Reserve
that are calculated in a manner similar to those applicable to bank holding
companies.
Under capital adequacy guidelines and the regulatory framework for prompt
corrective action, the Bank must meet specific capital guidelines that involve
quantitative measures of the Bank's assets, liabilities and certain
off-balance-sheet items as calculated under regulatory accounting practices. The
Bank's capital amounts and classification are also subject to qualitative
judgments by the regulators about components, risk weightings and other factors.
HomeTrust Bancshares, Inc. and the Bank each exceeded all regulatory capital
requirements as of December 31, 2021. Consistent with our goals to operate a
sound and profitable organization, our policy is for the Bank to maintain a
"well-capitalized" status under the regulatory capital categories of the Federal
Reserve. The Bank was categorized as "well-capitalized" at December 31, 2021
under applicable regulatory requirements.
                                       45
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HomeTrust Bancshares, Inc. and the Bank’s actual and required minimum capital
amounts and ratios are as follows:

                                                                                                               Regulatory Requirements
                                                                                          Minimum for Capital                            Minimum to Be
(Dollars in thousands)                                  Actual                             Adequacy Purposes                           Well Capitalized
                                              Amount              Ratio                Amount               Ratio                 Amount                 Ratio
HomeTrust Bancshares, Inc.
December 31, 2021
CTE1 Capital (to risk-weighted assets)     $ 380,835                11.16  %       $   153,538                4.50  %       $       221,777                 6.50  %
Tier I Capital (to total adjusted assets)    380,835                10.83  %           140,618                4.00  %               175,773                 5.00  %
Tier I Capital (to risk-weighted assets)     380,835                11.16  %           204,718                6.00  %               272,957                 8.00  %
Total Risk-based Capital (to risk-weighted
assets)                                      402,633                11.80  %           272,957                8.00  %               341,196                10.00  %

June 30, 2021
CTE1 Capital (to risk-weighted assets)     $ 375,320                11.26  %       $   149,943                4.50  %       $       216,584                 6.50  %
Tier I Capital (to total adjusted assets)    375,320                10.29  %           145,915                4.00  %               182,393                 5.00  %
Tier I Capital (to risk-weighted assets)     375,320                11.26  %           199,924                6.00  %               266,565                 8.00  %
Total Risk-based Capital (to risk-weighted
assets)                                      398,408                11.96  %           266,565                8.00  %               333,206                10.00  %

HomeTrust Bank:
December 31, 2021
CTE1 Capital (to risk-weighted assets)     $ 368,790                10.81  %       $   153,535                4.50  %       $       221,772                 6.50  %
Tier I Capital (to total adjusted assets)    368,790                10.49  %           140,589                4.00  %               175,737                 5.00  %
Tier I Capital (to risk-weighted assets)     368,790                10.81  %           204,713                6.00  %               272,951                 8.00  %
Total Risk-based Capital (to risk-weighted
assets)                                      390,588                11.45  %           272,951                8.00  %               341,188                10.00  %

June 30, 2021
CTE1 capital (to risk-weighted assets)     $ 357,767                10.74  %       $   149,936                4.50  %       $       216,575                 6.50  %
Tier I Capital (to total adjusted assets)    357,767                 9.81  %           145,933                4.00  %               182,417                 5.00  %
Tier I Capital (to risk-weighted assets)     357,767                10.74  %           199,915                6.00  %               266,553                 8.00  %
Total Risk-based Capital (to risk-weighted
assets)                                      380,855                11.43  %           266,553                8.00  %               333,192                10.00  %


In addition to the minimum CET1, Tier 1 and total risk-based capital ratios,
both HomeTrust Bancshares, Inc. and the Bank have to maintain a capital
conservation buffer consisting of additional CET1 capital of more than 2.5%
above the required minimum levels in order to avoid limitations on paying
dividends, engaging in share repurchases, and paying discretionary bonuses based
on percentages of eligible retained income that could be utilized for such
actions. At December 31, 2021, the conservation buffer was 3.80% and 3.45% for
HomeTrust Bancshares, Inc. and the Bank, respectively.
Impact of Inflation
The effects of price changes and inflation can vary substantially for most
financial institutions. While management believes that inflation affects the
growth of total assets, it believes that it is difficult to assess the overall
impact. Management believes this to be the case due to the fact that generally
neither the timing nor the magnitude of the inflationary changes in the CPI
coincides with changes in interest rates. The price of one or more of the
components of the CPI may fluctuate considerably and thereby influence the
overall CPI without having a corresponding effect on interest rates or upon the
cost of those goods and services normally purchased by us. In years of high
inflation and high interest rates, intermediate and long-term interest rates
tend to increase, thereby adversely impacting the market values of investment
securities, mortgage loans and other long-term fixed rate loans. In addition,
higher short-term interest rates caused by inflation tend to increase the cost
of funds. In other years, the opposite may occur.
Item 3.    Quantitative and Qualitative Disclosure About Market Risk
There has not been any material change in the market risk disclosures contained
in our 2021 Form 10-K.
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